Commodities trading outlook: gold futures steady with Greece in focus, copper little changed

Gold held on Wednesday near the lowest in six weeks as equities gained some ground on increasing speculations that Greece will request an extension of its bailout deal. Copper was steady on hopes for a Greek debt deal, while top consumer China entered week-long holidays.

Comex gold for delivery in April fell 0.17% to $1 206.5 per troy ounce by 10:25 GMT, having shifted in a daily range of $1 210.5-$1 205.9 an ounce. The precious metal fell 1.51% the previous session to $1 208.6, but not before it touched $1 203.3, its lowest since January 6th.

Gold prices have recently received support amid fears Greece may be the first country to exit the Eurozone as officials struggle to reach an agreement on a new bailout plan with Europe’s most indebted country.

Greece’s current deal is set to expire at the end of the month, leaving the country without further funding and possibly running out of money in March. On Monday, the Eurogroup met in Brussels and Dutch Finance Minister Jeroen Dijsselbloem proposed to Athens to ask for a six-month extension, giving Greece time until Friday to do so.

The new Greek government, led by Prime Minister Alexis Tsipras, has repeatedly said that it would not seek extra time on its current agreement. Greece described the deal offered by Mr. Dijsselbloem as “unacceptable” and “highly problematic”.

However, Athens will request an extension on Wednesday, according to a person familiar with the matter, who asked not to be named.

Meanwhile, gold buying has been hit by the absence of the world’s second-largest consumer. China’s markets closed on Wednesday as the country celebrates its one-week long Lunar New Year holiday.

China provided strong demand in the pre-holiday period as people purchased the metal to exange gold gifts during the celebrations. However, demand is projected to slow down during and after the period.

“With the Shanghai Gold Exchange closed, gold may be vulnerable to further selling pressures and is close to testing the psychological $1,200 level,” HSBC analyst James Steel said, cited by CNBC.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained at 768.26 tons on Tuesday. Changes in holdings typically move gold prices in the same direction.

Later today, the Federal Reserve is due to release minutes from its meeting in January, when policy makers restated their “patient” stance on when interest rates will be increased.

However, Fed officials improved their evaluation of the US economy, spurring speculations that borrowing costs, which have been held near zero since 2008, would be lifted soon.

An increase in interest rates would hurt the performance of non-interest-bearing assets, such as gold, while boosting the strength of the dollar.

The US dollar index for settlement in March was up 0.15% at 94.290 at 10:26 GMT. It fell 0.14% on Tuesday and closed at 94.147. A stronger greenback makes dollar-denominated commodities pricier for holders of foreign currencies and curbs their appeal as an alternative investment.

Copper

Comex copper for delivery in March traded 0.02% higher at $2.5820 per pound at 10:26 GMT, having shifted between $2.5920 and $2.5650 during the day. The contract slid 0.9% the prior session to $2.5815 a pound.

The industrial metal drew support amid hopes that the new Greek government may strike a deal with its creditors but any significant moves were unlikely in the absence of top consumer China from the market.

The head of the PBOCs research bureau said yesterday that economic growth in China may slow to between 6.9 and 7.1% in 2015.

CNBC reported on Monday, citing policy insiders, that Chinese authorities will take further measures to ensure economic growth of about 7% in 2015, including cutting interest rates, boosting liquidity and tolerating some currency weakness. The People’s Bank of China recently reduced the minimum reserve requirements for banks by 1% after it cut interest rates in late 2014 for the first time in over two years.

Meanwhile, the Bank of Japan maintained unprecedented monetary stimulus on Wednesday in a push to bolster growth after the Japanese economy swung out of recession in the fourth quarter, but expansion fell well short of economists’ expectations.

The central bank decided to keep its benchmark interest rate unchanged, and, as expected by analysts, to boost the monetary base at an annual pace of 80 trillion yen.

Providing some support on the supply side, this year’s global copper surplus may be thinner than previously expected as BHP Billiton Ltd. reported that as much as 70 000 tons of refined copper output will be lost due to repairs at the largest processing mill at its Australian Olympic Dam mine.

This would remove a large fraction of an expected surplus, which analysts had estimated prior to the announcement at 120 000 – 220 000 tons. The supply disruptions will probably cut global copper output growth to 5.1% in 2015, Australia & New Zealand Banking Group Ltd. said.

Market players now eyed upcoming economic data from the US, with a pickup in the issuance of building permits expected for January, while housing starts probably fell last month and producer prices remained in the deflation zone for a third straight month. Minutes from FOMC’s January 27-28 meeting are due to be released at 19:00 GMT.